Rethinking The Economic Impacts And Integration Of Refugees

The future prosperity and stability of the host countries depend on providing economic opportunities that will benefit both refugees and locals

With the recent migration waves, the number of people in the exodus from Syria alone reaches up to more than 6.7 million, not to mention other conflict zones. This has resulted in one of the largest humanitarian crises of all time, with serious consequences across the Middle East, Europe, and beyond. The majority of Syrians have fled to neighbouring countries, primarily Turkey (3.5 million), Jordan (1.8 million), and Lebanon (1.5 million). And Germany’s open-door refugee policy has led to the arrival of over one million refugees in the past 5 years, by far the highest number in the EU.

WHAT DOES THE UNITED NATIONS SAY ABOUT REFUGEES?

According to the UN 1951 Convention, a refugee is someone who is unable or unwilling to return to their country of origin owing to a well-founded fear of being persecuted for reasons of race, religion, nationality, membership of a particular social group, or political opinion. Within the scope of international protection, refugees should be guaranteed the fundamental rights to adequate standards of living, e.g. access to social housing, welfare benefits and employment opportunities, in order to be economically and socially integrated into their country of refuge. Many believe such a great number of refugees are a heavy burden on the economies of host countries and they are a drain on services and competition for employment. In fact, the economic outcomes of refugee intake are manifold, and they depend on various dynamics. For example, skilled and trained migrants can maximize their employment chances on an individual level while the primary goal of refugees is to secure personal safety. Therefore, refugees usually fail to support themselves in the short term, due to lack of capital and/or documents that they had to leave behind, difficulty in meeting job qualifications, language barriers, legal constraints, and the low-paying illegal labor market, relying on social assistance as they remain unemployed.

ECONOMIC OUTCOMES ON INDIVIDUAL AND MACRO LEVEL

These factors show that refugees may strain the host countries’ resources at some level. But, as migrants enter into the workforce, they can get higher-paying and higher-skill jobs. Even if this can produce adverse effects for low-skilled local workers, experience indicates that any such effects are limited and temporary.

To open up refugees’ path to the labor market, employment restrictions in the asylum process should be minimized

For the macro-economic impacts of the refugee influx, a recent simulation by IMF shows that although it is costly for the public budget to fund refugee integration activities (e.g. language and professional training) in the short run, the social, economic and fiscal benefits of this integration may offset such costs in the medium- to longrun. Depending on the integration policies and funding, the annual long-term GDP effect would be 0.2 % to 1.4% above the baseline growth, and the full repayment of the integration investment would be achieved in 9-19 years. Therefore, we can say that the future prosperity and stability of the host countries depend on providing economic opportunities that will benefit both refugees and locals.

POLICIES AND BUSINESS PRACTICES FOR LABOUR MARKET INTEGRATION OF REFUGEES

Evidence suggests that the best way to achieve refugee integration is to grant them access to formal jobs, the right to establish businesses, and mobility within the labour markets. In order to open up refugees’ path to the labor market, employment restrictions in the asylum process should be minimized. Wage subsidies to private employers for hiring refugees could be effective in reducing illegal employment. Short-term exceptions to the minimum wage may also be an alternative. Additionally, vocational training programs aligned with employers’ needs and offered to both locals and refugees may enable individuals to find jobs according to their skills more easily. Effective labour market integration is the key to reducing the net fiscal cost of the refugee intake. The sooner the refugees gain employment, the more they will contribute to the economy paying income taxes and social security contributions. This economic integration can also counter some of the adverse fiscal effects of the aging of the population, the emigration of natives and migration from rural areas to cities.

The sooner the refugees gain employment, the more they can contribute to the economy

GIVING A CHANCE TO REFUGEE ENTREPRENEURSHIP

Refugees, with their keen perception of risk, conscientiousness, and desire for achievement and recognition of opportunities, are prone to be entrepreneurial. In Turkey, Syrian refugees have invested almost $334 million into the Turkish economy since 2011, with more than 15,000 Syrian-owned enterprises employing an average of 9.4 workers. However, the entrepreneurship rate among Syrians in Turkey is meagre at 1.26%. Legal assistance, flexibility in documents required for opening business bank accounts, and access to credits and micro-loans for refugee entrepreneurs should be provided. Finally, establishing and investing in refugee entrepreneurship support programs (i.e. tailored incubators and accelerators) are very important for paving the way for potential entrepreneurs to be financially self-sufficient, to employ others, and to contribute to the entrepreneurship ecosystem of the country. Such programs are often established by collaborative efforts of the private sector, government institutions and NGOs of various countries. Creating more inclusive economic and political opportunities for society is crucial to improve the living standards and to avoid future conflicts across the region. Accordingly, the economic impact could be larger, in the long run, depending on initiatives to open avenues of self-employment and labour market integration for refugees.

Academician Ayşe Seyyide Kaptaner